Q2 2026 Champion Iron Ltd Earnings Call
Speaker #3: Good morning , ladies and gentlemen , and welcome to the Champion Iron Limited's second quarter results of the financial year 2026 conference call .
Speaker #3: At this time , all lines are now listen only mode . Following the presentation , we will conduct a question and answer session .
Speaker #3: If at any time during this call , you need assistance , please press Star zero for the operator . This call is being recorded on Thursday , October 30th , 2025 .
Speaker #3: I would now like to turn the conference over to Michael Marcotte Senior Vice President , Corporate Development and Capital Markets . Please go ahead .
Speaker #4: Thank you . Operator and thank you , everyone , for joining our call today . Before we get going , I'd like to point you to our at Champion Iron , where you will find the website presentation we'll be using throughout this call .
Speaker #4: On our website , you can also find our mDNA , where we make references to forward looking statements as we'll be making several forward looking statements throughout this call .
Speaker #4: Joining me here today includes our CEO , David Cataford , who's going to be doing the formal presentation . And also Alexander Bello or CEO , in addition to other member of our executive team and some directors .
Speaker #4: With that , I'll pass it over to David , who will also do Q&A portion on the back end of the call . David .
Speaker #4: Thanks , Michael . Thanks everyone for being on the call . Very happy to be able to discuss our second quarter fiscal year 2026 results .
What does that mean in terms of provisional price? Well, if you remember at the end of last quarter, we had expected to settle our tons at around a hundred dollars per ton, we managed to achieve 112 dollars per ton. So uh since we had 2.5 million tons on the water that gave us a, um, provisional price impact of about 30, uh, million US dollars for the quarter. So, uh very positive for us. When you look at next quarter, we do have a potential um upside uh if our lower prices, stay where they're at because at the end of last quarter we had 2.5 million tons on the water with an expected price of 114. But as you've seen our in our prices closer to about 120, uh, at this time,
What does that mean in terms of our average realized selling price. So if you look at the quarter slightly lower than the average, for the p65 1 of the main impacts is definitely the fact that uh well we had 2.5 million tons at the end of of the quarter that was forecasted to settle at a lower price uh so that definitely had an impact on our realized price for
A quarter. And secondly, as you know, we are finalizing now. Our DRP project. So uh this year we have been selling more tons on the spot Market because we are going to transition to this higher grade material next year and did not want to lock up. Um, long-term contracts for our current, um, material that will be converted to higher grade.
When you combine a very thorough, um, shutdown. Uh, so we managed with the teams to be able to, not only hit the, um, the proposed time for the shutdown, but also work very hard on managing our costs, uh, improved our production and, uh, really worked with the teams to be able to see where can we, um, improve in terms of cost without jeopardizing, our long-term plan and, uh, working all together, improving our production. We managed to hit 76 dollars per ton during uh, semiannual shutdown quarters. So, very proud of what the team has been able to achieve.
What does that mean? In terms of financial highlights, so quarterly revenues just shy of 500 million, he did of 175 and um an EPS of 11 cents per share. So a very happy with the results that we managed to achieve in this quarter.
What does that mean in terms of cash? So our cash didn't improve significantly during the quarter from 176 million to 325 million 2, main reasons for this. Well, obviously the great quarter that we had but also the closing of our senior secured, um, unsecured notes, sorry, uh so uh that definitely um, helped in terms of our cash balance. So even if we continue to investing in sustaining capex continued investing in the actual vpf project, paid our dividend. Uh we managed to uh increase our cash from 176 to 325 million.
In terms of balance sheet. Uh, so we, we have over a billion dollars of available liquidity. So, uh, very well positioned to be able to finalize, our growth initiative, to be able to, uh, convert half of our tons to 69% and, um, very well positioned as well. Now that we end our 7-year capex run to be able to uh, start deleveraging and potentially um change our Capital return uh structure.
In terms of growth projects. So as we mentioned, our DRP project uh, still on time to be able to delivered at the uh end of this uh calendar year. So uh very happy with the progress of the actual Construction. In terms of cost, we do expect to finalize the project at roughly around 500 million. So I was, which is pretty much in line with the inflation adjusted uh capital expenditure going back to January 2023. So uh when you look at the work that's been done and this uh inflation environment, very proud that we'll be able to deliver our third major project on time and on budget,
In terms of canning, you probably saw that during the quarter that uh, we finalized the transaction with nipon steel and sojs, so securing. The first payment of 68 million when we um discuss the cache of 325 million. This does not include the 68.6 million. This cache is in a restricted account uh controlled by us in the county partnership.
So, um, that is over and above the 325 million that we currently have, um, as as cash within the company. So very happy of uh, having closed that uh transaction. So it there's a bit of noise in the market. When you look now in terms of what our premiums for high grade, whereas our nor going, but when you have 2 of the largest Japanese companies investing in a green field project in Canada to produce high-grade iron, ore, it really shows that we do believe we're in the right. Commodity going forward to be able to maximize return for our shareholders.
Why do I say this? Well we um have not seen projects of scale being able to uh, to come online to improve the, uh, quality of the actual aronora that's traded on the seaborne market. What we're actually seeing is Majors reducing the, uh, quality of the material. So we have the p62 that is now a p61. So 1% Less in terms of quality you have seen contaminants increase significantly over the past decades and, uh, we do see quite a lot of companies that are announcing declining, uh, grades, in terms of their materials. So we're a bit counter, um, that Trend because we are improving the grade of our material. And I do think that over time, this is going to significantly increase the premiums for our material and um, trickle down as better returns for our shareholders.
With that being said, I'd like to thank the team because I think we we did an outstanding job during this quarter and I would like to turn it over to uh questions that you might have.
Thank you.
Ladies and gentlemen, we will now take in the question and answer session. Should you have a question please? Press the star followed by the 1 on your touchtone phone, you will hear a prompt that your hand has been raised. If you wish to decline from the polling process, please press star followed by the 2 and if you are using a speaker-phone, please let the handset before pressing any key.
Press question is from orisaka at Scotia Bank. Please go ahead.
Hi, good morning and uh, congratulations on the operating performance. Um, curious if you can give us some color on the Improvement in cash costs. I mean last quarter you warned about uh costs staying elevated because of harder or in a different pit. I was just curious. Are you out of that pit earlier than expected or what's driving the Improvement?
Thanks for the question uh, Orest. Um, when you look at the, the last quarter so we're still in that more difficult Aura. I think what the team has managed to do 1, when we're in the harder or it does create more fine material. So, uh, there was an impact in terms of recovery if you like, look at the last quarters, the team did a very good job in these, in being able to, um, to improve on the recovery. We did quite a lot of work. In the plants, to make sure that we tweak, our circuits to be able to maximize the recovery for that material. We also worked with the mining side to be able to switch a little bit, the blending strategy. So, uh, definitely, uh, as we've been a few months with this type of material, when we understand it a bit better. Well, it's easier to be able to, um, to blend it and be able to minimize the impact. And if you look at this quarter, we also have the volume effect. So going from roughly about 3.2 million tons to 3.5, uh, was definitely an improvement for us. So if you combine all of those that definitely helped in terms of our
Clustering the quarter.
Just as a follow-up. Do you think these cash costs are now sustainable? As your next quarter is not a schedule maintenance quarter. Um, do you think you can maintain those costs?
Well, we're we're surely going to work to be able to um, to reduce as much as we can. The operating costs, I think, as you know that it's really a volume, uh, portion of this stage. I think that the teams have done a very good job, in terms of the maintenance side, the uptime of the plants, if we can hold this in this quarter, I do expect that. We'll be able to um, to continue on our uh, cost Journey. But uh realistically, it all depends of the actual volume will be able to produce during the quarter.
Okay, thank you very much.
Thank you. Next question.
Thank you very much. Good morning, everyone. David and the team, congrats on the trunk water. A nice bead, um, and could you remind us please about seasonality that typical effects that this talk in process. I know winter is not tough, but if you can quantify these and, um,
So going forward into the winter, should we expect? Kind of slow down in this Activity? Thank you.
Just to make sure, was the question on the, um,
on these talking. Yeah, so when we look at what we've managed to achieve, now, obviously, we were in the best period of the year to be able to bring down material. There was no impact from forest fires. There was, um, quite a lot of collaboration between ourselves and the rail operator. So I think we were, we were in The Sweet Spot in terms of bringing down tons. Um, if I look at the next quarter, uh, well, we're going to start entering the winter months and as, you know, we have some mitigation measures to make sure that we don't freeze the material in the older cars. So, uh, that definitely usually reduces a little bit the, um, the performance per train, but realistically, I think we've, we've improved significantly the Rolling Stock and the actual, uh, Logistics cycle. So I think that's 1 positive and our team at site is definitely aligned to be able to find every opportunity that we have to not lose a single, uh, single chance of putting tons on those trains. So, I think we, we've done some improvements that, um, allow us to think we'll be able to continue to destock, but we are entering in the period.
There's a little less productivity on that front though.
Thank you, helpful. And, and my follow-up is on grps.
Um, is it fair to assume that the previous estimate of?
$20 per ton premium is appropriate for for the output of the RPA and what is the expected run after a file in terms of volumes and timing? Um, and specifically, what percent of total sales won't do you expect the RPF to present once fully Run, is it would be a hot.
Thank you.
I mean next year is going to be a transition year so definitely we're going to work with our clients to be able to approve that we can make 69% material and they'll be able to test it in their plan. So as with uh, all new products, there's usually a little bit of lag time before we get the full benefits of this material. But we do expect that these premiums will be significant. Once we've, uh, finalized the ramp up work with our, uh, various clients, and be able to sign longer term contracts for this type of material.
Okay, thank you. I'll go back to you. Congrats 1 more time.
Thanks.
Thank you. The next question comes from. Craig Hutcherson at TD Cowen, please go ahead.
Hi, good morning, guys.
I'm pretty impressive sales, volumes for the quarter. I just wanted to confirm, maybe follow up to the last question. Did you guys have the scheduled maintenance or was there a scheduled maintenance in September that you typically occur and or is that something that's going to be pushed into to Q4?
Yeah. So, uh, thanks for the question Greg. So, what during the quarter there was a 12-day shutdown. So, that did happen in September, uh, but despite that we still managed to achieve the results that we did. So I think it was a, a very good combination of teamwork, and of collaboration between us and ioc.
Okay, great. And just a grpf. I mean, they're spending the quarter was, was a bit lighter than I expected. And, you know, you've talked about a slight increase on inflation is, is the balance of spending is, is that mostly going to be pushed into the calendar fourth quarter, or will it some of that be spread out into into early next year as well?
Yeah, it's it's always difficult to match that perfectly between the work that's actually being done and what's being paid. So that there is a lag sometimes of work being done in the actual payments. So it's not because we reduce the Cadence during the quarter. It's really, uh, due more to, uh, payment schedules that we have. But, uh, we we have not reduced the, um, the, uh, Cadence on that project. So when you look at the actual, um, dollars out, uh, it's probably going to be a few quarters. Um, after the completion of the plant that you'll see the final, uh, the final sort of investment for, uh, the DRP. But we that, that the same thing is, what happened with Phase 2, or with Phase 1.
Okay, great. Uh and then just on the the DRP project in general, I know the plan is to search shipping commercial volumes since their second half and next year, but is the plan to to blend in the first half. Will you guys be expensing that and and and booking that as Revenue? If you blend it with your other material or is the plan to sort of capitalize? Some of those costs uh and revenues to the first half, until you're producing a product that sort of meets back.
Well, right now, what we're targeting to do initially is probably to blend the material, so we will be paid for the iron units. Uh, so as we ramp up the plant, I mean, obviously if if it's a very smooth ride and we can deliver it quicker, well, then that strategy will change but right now the strategy is really to be able to 1 that will be able to prove the the quality of the material. But first especially, I mean, we're starting this in the winter months. It's not the best month to be able to start, um, uh, 2 products at the, uh, Port 2 products with the trains. So, uh, we want to demonstrate the actual robustness of the plant, uh, make sure that we can, um, achieve the different qualities. But at first, as you mentioned, we'll be blending that and that'll trickle down in terms of Revenue only in uh, iron units. So there's usually formulas that we have already in place with our various clients to be able to account for that and as we're comfortable with the delivery of the plant, well then we'll be able to start, uh, really segregating 2 types of materials and having uh, 69% concentrate or
Or or pellet feed and uh, our typical 66% material.
Okay, great. I mean, just 1 last question for me. Can you just me talking what you're hearing in the Dr? Product, in general. Um, I think the last question was just on premiums. Just, just what, how, how robust is the market right now. I know there's some weakness in Europe and other places but just give us a broad overview. What what you're hearing with regards to Dr. In general.
The amount of a steal that they produce that is definitely a positive for us. And for premiums, in terms of this type of material, we have seen projects also in North Africa and even in Europe that are continuing in terms of their dri and eaf transitions. Some have been delivered, some will be delivered next year in the following year, we're seeing the same in the Middle East. So there might be a bit of a lag between when we see the actual crunch for demand for this type of material and when we deliver our plant, but we still think that uh, this material is going to fetch a pretty significant premium though.
I agree. Great. Great quarter, guys. Thanks.
Thank you, ladies and gentlemen, as a reminder, should you have any questions please? Press star followed by the 1?
the next question comes from, Stephan yohanu at
Yeah, thanks guys. I think most of my questions have been kind of answered in general but just maybe just 1 more thing on the on the, the, the the the stockpile the stocking. Um, is it still? I, I know it kind of it's going to vary quarter to quarter based on maintenance and weather and whatnot. But is a fair assumption that this is something that gets down to a a quote unquote, normal level say through through the end of 2026, is that a good way to think about it or
I mean, I I I would love to do it quicker if I can. So I'm definitely going to put all the efforts to get there. I think it's a reasonable, um, prediction. But again as you know, we do not control the rails. So, uh, going to we're going to live with that partnership. I do see some improvements. I mean 477,000 tons, during the quarter I think was pretty good uh, hitting a record sales even if they had 12 days shutdown. So we we'll capitalize on every opportunity. We have to bring down that stock pile. We, we should not in the future have more than a few hundred thousand tons of sight. That is very, uh, up and down depending on whether and things like that, because our strategy as, you know, has never been to stockpile material. So hopefully by the end of 2026, as you mentioned that, that story can be behind us.
Sir. Okay, okay, great, great. And maybe just just on the minutia sort of of this idea of, you know, when you start creating the higher grade product and then blending it at first, um, just just curious like when you start producing it and you're showing the plant Works, how long does it take a potential customer to take that material test it, get comfortable with it and then come back to sign a contract.
Yes, I it depends of uh which client and how much they need the material. So um I mean, once we've got the specs, we've already sent quite a lot of tests, uh, material to our various clients so they have tested it at various levels in their Labs. So, uh, I think it's more of a waiting pattern for certain to make sure that we can actually hit the quality. I think we've seen in the mind,
Industry, few people, sometimes overpromise things and under deliver. It's not really the way that we work. But still when you say that it doesn't mean that people believe us on on work. See the actual material. So uh, I I expect that once we're we're able to produce the material while that that doubt is going to be behind and we'll be able to start signing the long-term contracts.
Okay. Okay, great. Thanks. Very much and congrats again on on the nice quarter.
Thank you, we have no further questions. I will turn the call back over to David catapult for closing comments.
Yes again, thanks everyone for your support. Uh, I mean when we when we look at your company, um, I mean we've we've had quite a lot of support from from all of you over the past. 70 years that we've done a significant capex run to be able to get the, the, the company where it's at. Now we've got a very strong Foundation. We're going to deliver 1 of the best products in the world. We're going to be able to capitalize on increased premiums going forward. Might be a little lag on that, but I still think it's the right strategy because we're really differentiating ourselves from, uh, what we're seeing in the rest of the world, where quality is declining. So, next year is an inflection point for us. It's really the, the, the moment where, uh, capex are significant, capex, are a bit behind us, and we can start benefiting from all the Investments that we've made. So, again, thanks for your support over the years and looking forward to be able to present the next quarter in a few months. Thanks everyone.
Thank you, ladies and gentlemen, this concludes your conference call for today. We thank you for participating. And we ask that you, please disconnect your lines